This Fried Frank memo discusses President Obama’s recent decision to block a pending deal that would have resulted in the acquisition of the US business of Aixtron AG, a German semiconductor company, by a Chinese investment fund. The President’s action was taken upon the recommendation of The Committee on Foreign Investment in the United States, or “CFIUS” – and represents only the third time in history that a deal has been blocked by an American President on national security grounds.
This excerpt highlights key takeaways about the trends & features of the CFIUS review process that can be drawn from the decision to block the Aixtron deal:
First, CFIUS has jurisdiction to review the acquisition of a non-U.S. company if it involves a U.S. subsidiary or other U.S. business. Second, CFIUS remains focused on investments in the high-tech sector – and semiconductors in particular – especially when the company’s technology has military applications. Third, CFIUS scrutiny is heightened in the case of Chinese investments, as all three presidential actions under CFIUS have involved Chinese acquirors. We expect these trends to continue in the next administration, and that CFIUS’ jurisdiction and activity may even expand.
This Sullivan & Cromwell memo addresses the Aixtron situation, & also discusses possible changes on the horizon for CFIUS review – including broadening the factors to be considered by CFIUS beyond national security to include economic & other considerations.
– John Jenkins